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Dot-com redux: OpenTable IPO soars 59% in trading debut

May 21, 2009 |  2:09 pm

OpenTable Inc. lived up to its hype: Shares of the online restaurant-reservations company rocketed after they began trading today, following Wednesday’s initial public offering.

The San Francisco firm’s stock soared 59% to close at $31.89 on Nasdaq, after the company and insiders late Wednesday sold a total of 3 million shares at $20 each.

That’s the biggest first-day gain for an IPO since energy-management systems firm Orion Energy Systems shot up 65% in its debut in December 2007, according to IPO tracker Renaissance Capital. (That stock, by the way, has since crashed.)

In an echo of the dot-com days, OpenTable turned out to be a flipper’s delight -- although that shouldn’t be any comfort to the company. Nearly 5 million shares changed hands, or 163% of the shares sold. The stock traded as high as $35.50.

Opentable"When a company sells very few shares, as OpenTable did, it tends to increase the volatility" in the stock, notes Eric Guja, an analyst at Renaissance.

Still, Silicon Valley has been waiting on this deal, hoping that a strong reception could open the door for other private tech companies eager to tap the public market for money.

OpenTable, founded in 1998, lost $1 million last year on sales of $56 million, but its fans say the loss was only because of costs associated with the firm’s expansion into Europe.

The appeal of the company is its critical mass, with more than 10,000 restaurants in its network, each of which pays a fee for each diner seated via an OpenTable reservation.

With the restaurant business struggling in the recession, one argument against OpenTable is that it’s serving a declining industry. The counter to that is that hard-hit restaurants may be more likely to try to fill seats using OpenTable’s system.

At today’s closing price, OpenTable’s stock market value is about $700 million, or 12.5 times sales. That doesn’t match the level of madness we saw in the dot-com boom, but it’s a steep valuation nonetheless.

-- Tom Petruno

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